The Programme of Community aid to the countries of Central and Eastern Europe (Phare) is the main financial instrument of the pre-accession strategy for the Central and Eastern European countries (CEECs) which have applied for membership of the European Union. Since 1994, Phare's tasks have been adapted to the priorities and needs of each CEEC. The revamped Phare programme, with a budget of over EUR 10 billion for the period 2000-2006 (about 1.5 billion per year), has two main priorities, namely institutional and capacity-building and investment financing. Although the Phare programme was originally reserved for the countries of Central and Eastern Europe, it is set to be extended to the applicant countries of the western Balkans.

ACT

Council Regulation (EEC) No 3906/89 of 18 December 1989 on economic aid to the Republic of Hungary and the Polish People's Republic [See amending acts].

SUMMARY

The Phare programme, as a pre-accession instrument, is the main channel for the European Community's financial and technical cooperation with the countries of Central and Eastern Europe (CEECs). Its activities concentrate on two priorities:

helping the administrations of the candidate countries to acquire the capacity to implement the Community acquis. Phare also helps the national and regional administrations, as well as regulatory and supervisory bodies, in the candidate countries to familiarise themselves with Community objectives and procedures;

helping the candidate countries to bring their industries and basic infrastructure up to Community standards by mobilising the investment required, particularly in areas where Community rules are increasingly demanding: environment, transport, industry, product quality, working conditions etc.

From 2000, Phare's management methods were revamped with a view to:

concentrating projects on the acquis implementation priorities programmed by the accession partnerships;

improving budgetary implementation;

radically increasing the size of projects;

continuing the decentralisation of management to the recipient countries.

Financing systems

Phare's assistance generally takes the form of grants rather than loans. The aid is granted by the Community, either independently or in the form of co-financing with the Member States, the European Investment Bank, third countries or other bodies in the recipient countries themselves.

In line with the Agenda 2000 recommendations, Phare has gradually changed into a structural fund designed to encourage economic development. Much of the investment involved is co-financed by other institutions such as the World Bank, the European Bank for Reconstruction and Development and the European Investment Bank (EIB).

Programming

Although originally programmed on an annual basis, Phare is now based on a system of multi-annual programming.

As part of the pre-accession strategy, the basic programming instrument is the accession partnership which is drawn up for each country and sets out priorities and intermediate objectives and the financial resources needed to achieve them. Each country's partnership is supplemented by its own national programme for the adoption of the acquis (NPAA).

The accession partnerships provide the basis for programming Phare national programmes and cross-border co-operation programmes.

Phare may include multi-country projects if there is justification for such an approach in order to achieve economies of scale, promote regional cooperation or ensure that certain sharing arrangements are applied in areas such as justice and home affairs.

Procedure

The Phare implementing rules are based on the provisions of the basic regulation and the Community's Financial Regulation and on procedures created specially for the Phare programme.

The Commission is assisted by a management committee composed of representatives of the Member States and chaired by the representative of the Commission. A representative of the European Investment Bank (EIB) also takes part in the work of the management committee.

Implementation of national programmes is decentralised, i.e. the candidate countries are themselves responsible in as far as this is authorised by the Community's Financial Regulation. The Commission monitors implementation jointly with the candidate countries.

Background

Originally set up in 1989 to support the process of reform and economic and political transition in Poland and Hungary, Phare became the financial instrument of the pre-accession strategy leading ultimately to the accession to the EU of the ten associated Central and Eastern European countries following the Essen European Council in December 1994.

In the initial stages of the transition, the programme focused on providing know-how and technical assistance and, where necessary, humanitarian aid. As progress was made, the demand for technical assistance declined in relative terms and the need for investment aid, particularly in areas such as infrastructure and environmental protection, increased considerably.

Following the publication of Agenda 2000 and the stepping-up of the enlargement process which ensued, Phare was redirected towards preparing the candidate countries for accession and was complemented by two other instruments: the Instrument for Structural Policies for Pre-Accession (ISPA) and the Special Accession Programme for Agriculture and Rural Development (SAPARD). These instruments, which were set up for the period 2000-2006, will be replaced by the Instrument for Pre-Accession Assistance (IPA) for the period 2007-2013.

The candidate countries that have benefited from Phare are Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. Turkey receives specific pre-accession assistance under Regulation (EC) No 2500/2001, which will also be replaced by the IPA.

Report from the Commission of 12 January 2007 entitled "2005 Report on Phare, pre-accession and transition instruments" [COM(2007) 3 final - Not published in the Official Journal].

This report takes stock of pre-accession financial assistance in 2005, namely Phare, ISPA and SAPARD, of which Bulgaria and Romania are the remaining beneficiary countries, and the specific pre-accession assistance to Turkey. The Phare, ISPA and SAPARD programmes were extended to Croatia. Financial commitments in 2005 were divided as follows:

Phare: EUR 1178.96 million, comprising EUR 921 million for national programmes, EUR 80 million for cross-border co-operation, EUR 84.75 million for regional and horizontal programmes, EUR 6.31 million for nuclear safety, EUR 50 million for the decommissioning of the Kozloduy power plant in Bulgaria and EUR 36.9 million in additional allocations following the flooding in Bulgaria and Romania;

Pre-accession assistance - Turkey: EUR 277.7 million;

Transition Facility (temporary pre-accession financing under Article 34 of the Act of Accession for the ten Member States that joined in 2004): EUR 128.1 million.

In the run-up to accession, the candidate countries gradually prepare for the decentralised management of structural funds under the extended decentralisation system ("EDIS"). This decentralisation is part of the management of pre-accession aid. Accordingly, Bulgaria and Romania received increased assistance from the Commission to smooth the transfer of greater responsibility to the national authorities for the management and implementation of Phare programmes in the run-up to accession. Croatia is managing Phare funds under a partly decentralised implementation system (DIS), and Turkey too aims to move over to EDIS in 2007.

The 2005 report also addresses programmes co-financed with the international financial institutions (IFI), which primarily concern the Phare finance facilities for small and medium-sized enterprises (SME) and municipalities. The European Investment Bank (EIB) is continuing to implement a scheme set up with the Commission to foster the integration of candidate countries' cross-border regions.

Report from the Commission of 23 December 2005 entitled "2004 Report on Phare, pre-accession and transition instruments" [COM(2005) 701 final - Not published in the Official Journal].
This report takes stock of pre-accession financial assistance in 2004, namely Phare, ISPA and SAPARD, of which Bulgaria and Romania are the remaining beneficiary countries, and the specific pre-accession assistance to Turkey. It also examines the assistance granted to the ten new Member States, which can no longer benefit from the pre-accession instruments, namely the Transition Facility. This is provided for under the 2003 Accession Treaty for the period 2004-2006. Financial commitments in 2004 were divided as follows:

Phare: EUR 757.7 million, comprising EUR 577.8 million for national programmes, EUR 85 million for nuclear decommissioning, EUR 64 million for cross-border co-operation and EUR 28.4 million for multi-country and horizontal programmes. The remaining EUR 2.5 million cover commitments to the European Training Foundation;

Pre-accession assistance - Turkey: EUR 245.9 million;

Transition Facility: EUR 189.6 million.

The 2004 Commission report also discusses assistance for the northern part of Cyprus and the co-financing of programmes with the European Investment Bank (EIB) and International Financial Institutions (IFIs). The report gives an account of Phare programming in the light of cross-border co-operation alignment with INTERREG, the common approach to nuclear safety and the transition to the Extended Decentralisation Implementation System (EDIS) for programme management.

Report from the Commission of 1 March 2005 entitled "2003 Report on Phare and the pre-accession instruments for Cyprus, Malta and Turkey" [COM(2005) 64 final - Not published in the Official Journal].
The Commission assesses the progress of Phare in the ten beneficiary countries and the pre-accession instruments for Cyprus, Malta and Turkey. This report is accompanied by a technical paper containing sections on the programming and implementation of the Phare programme in each of the 13 beneficiary countries. In 2003, Phare commitments totalled EUR 1 699 million, made up of EUR 1 223 million for national programmes, EUR 161 million for cross-border co-operation, EUR 187 million for regional and horizontal programmes and EUR 128 million for nuclear safety.

Report from the Commission of 11 November 2003 entitled "2002 Report on Phare and the pre-accession instruments for Cyprus, Malta and Turkey" [COM(2005) 497 final - Not published in the Official Journal].
Between 2000 and 2002 Phare provided EUR 5 billion for investment support and institutional capacity-building in the beneficiary countries. The instruments used for this were twinning (seconding of experts to the candidate countries to help them implement Community legislation) and technical assistance. In 2002 Phare commitments totalled EUR 1 699 million, including EUR 1 168 million for national programmes, EUR 163 million for cross-border co-operation, EUR 260 million for regional and horizontal programmes and EUR 108 million for nuclear safety. The same year, pre-accession aid programmes for Cyprus, Malta and Turkey totalled EUR 168 million comprising EUR 10 million for Malta, EUR 12 million for Cyprus and EUR 146 million for Turkey.

The European Commission has continued to transfer responsibility for the management and implementation of Phare programmes to the authorities in the candidate countries. The same applied to pre-accession aid for Malta and Cyprus. The purpose of this transfer is to prepare the future Member States for the decentralised approach to programme management established under the Structural Funds.

Special Report No 5/2003 concerning PHARE and ISPA funding of environmental projects in the candidate countries together with the Commission's replies [Official Journal C 167 of 17.7.2003].

Report from the Commission to the European Parliament and the Council - General report on pre-accession assistance (PHARE - ISPA - SAPARD) in 2005 [COM/2006/746 final - Not published in the Official Journal]

Report from the Commission to the European Parliament and the Council - General report on pre-accession assistance (PHARE - ISPA - SAPARD) in 2004 [COM(2006) 137 final - Not published in the Official Journal].

Report from the Commission to the European Parliament and the Council - General Report on pre-accession assistance (PHARE - ISPA - SAPARD) in 2003 [COM/2005/178 final - Not published in the Official Journal]

Report from the Commission - General report on pre-accession assistance (PHARE - ISPA - SAPARD) in 2002 [COM(2003) 844 final - Not published in the Official Journal].

Report from the Commission - General report on pre-accession assistance (PHARE - ISPA - SAPARD) in 2001 [COM(2003) 329 final - Not published in the Official Journal].

Report from the Commission - General report on pre-accession assistance (PHARE - ISPA - SAPARD) in 2000 [COM(2002)781 final - Not published in the Official Journal].

Annual Report 2001 from the Commission of 3 March 2003 on the Phare programme [Report COM(2003) 97 final - Not published in the Official Journal].
For the period 200-2006, the programme provides some EUR 11 billion to support institution building through twinning and technical assistance and to support investment. In 2001 Phare commitments totalled EUR 1 641 million, including EUR 1 091 million for national programmes, EUR 163 million for cross-border co-operation, EUR 219 million for regional and horizontal programmes and EUR 168 million for nuclear safety. The programme stepped up support for the institutions of the recipient countries responsible for implementing the acquis on entry into the Union. In 2001, EUR 111.6 million were committed under Phare for the participation of the ten CEECs in Community programmes and EUR 2.15 million for their participation in the European Environment Agency.

From the point of view of programme management, the decentralisation process geared towards enhancing the ability of the CEECs to manage Community aid continued in 2001.

Commission Decision of 13 October 1999 on guidelines for Phare programme implementation in candidate countries for the period 2000-2006 in application of Article 8 of Regulation (EEC) No 3906/89 [SEC(1999) 1596 final - Not published in the Official Journal].
This decision lays down the main guidelines for Phare in the period in question. The Phare programme will focus on two main priorities:

Institutional capacity-building:

Investment.

The Commission sees twinning as the main instrument for building institutional capacity. Specific actions are also to be implemented concerning the participation of the candidate countries in Community programmes and in Community agencies and the adoption of civil society measures to safeguard and develop the democratic process. Support for investment will focus on two main priorities - the candidate countries' alignment with EU norms and standards and investment in economic and social areas, including the effects of restructuring in important sectors of the economy. Lastly, the Commission Decision establishes the mechanisms and procedures for implementing the Phare programme, which will be based mainly on decentralisation (to be further extended) and Commission supervision (through its Delegations).The guidelines laid down by this Decision will be reviewed before the end of 2002 and may be adapted to take account of any developments in the accession process.